The S&P500 mini-futures opened flat yesterday, but came to life as the day got closer to the Fed interest rate announcement at 2:00 p.m. After some wide fast moves, the futures settled down and closed at 2101.50, above the important 2100 level for the first time since this decline began, and about 14 points above the prior close. A good day for the Bulls.

The impetus for this irrational exuberance was a Fed statement that was not too hot and not too cold. The Fed didn’t raise interest rates – they’ve been teasing this for so long that nobody expected a rate increase this time – but they hinted again that next time, boy, watch out. Yawn.

The Fed statement promised that two economic elements – unemployment and inflation – would be the triggers for a rate increase.  Unemployment is about right, but the Fed thinks inflation is too low(!)  When it moves up closer to the official target of 2% per year, the Fed will act, they say.

The problem is that both unemployment and inflation rates are heavily engineered, not to say manipulated. They don’t offer much guidance for ordinary folk. The official inflation rate is around 1%, for example; the unofficial rate is close to 9%. The Fed can set the trigger anywhere and meet it any time. That help you much?

Today

Today the ES may go higher than yesterday’s high if overnight trading holds above the 2097-98.50 zone. A failure to hold above the 2097 line could push ES back down toward 2093.50-92.50 again.

Based on the price action, the ES should hold above 2090-88 today. But to move back to the top of the range, this mini-rally needs a strong follow-through on volume. Without it, the futures have has a chance to revisit the 2078-75 zone.

Major support levels for Thursday: 2054-55, 2035-32, 2025-23.50, 2018.50-16.50;
major resistance levels: 2128.50-29.50, 2134.50-36.50 and none

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Chart: S&P500 mini-futures (ESU5) July 29, 2015

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